High Down Trips Buyers

With all the recent enthusiasm about how lower interest rates are enabling more people to purchase homes, I am surprised to note that almost nothing has been said about the fact that the major obstacle for the first-time buyer is still the 20% down payment.

My own recent marketing of a $180,000 house in West Los Angeles is a case in point. Dick Turpin quotes in his April 20 column that a quarter-point drop in interest rates allows 500,000 home buyers to enter the market. A drop from 10% to 9 3/4% for 30 years on a $144,000 loan (80% of $180,000) reduces the monthly payment from $1,264 to $1,237--grand savings of about 90 cents a day. Ninety cents will bring a half-million people into the market? Where are they going to get the $36,000 down?

Many of my potential buyers were well-qualified on the income side and were often paying more in rent than the mortgage on a home. Ironically, while reducing rates, lenders seem to be requiring more down than ever these days, and in fact, except for special developer incentives, 5% or 10% down is becoming virtually non-existent. Low interest is great , but let's not ignore the other, and often tougher, apsect of the situation.